De-LAB’s interviews: Maria Giovanna Ioppolo!
Let’s see what the New Year has brought around: this month our “key people around” is Maria Giovanna Ioppolo, Banking & Finance lawyer, expert of green bonds 🙂
1) Following the Covid-19 pandemic, what role has sustainability taken on in the agendas of Italian financial institutions? In your opinion, can sustainable finance be the driving force for post-crisis recovery?
I start from a necessary premise: in recent years (and, therefore, before the pandemic) the number of loans granted by Italian banks to support sustainable projects has always been on the rise. Even after the Covid-19 epidemic, financial institutions continue to pay equal (if not greater) attention to ESG (Environmental, Social and Governance) performance, also in light of the important role that sustainability plays in the new Next Generation EU, the plan drawn up by the European Commission to support our continent after the pandemic. I am therefore certain that sustainable finance can be the driving force behind post-crisis recovery, and to confirm my conviction I think of the case of the Spanish bank Bbva, protagonist of the first issue, at European level, of social bonds linked to the Covid-19 pandemic. To give some numbers, this was a social bond issue, launched last October with the aim of protecting jobs, which collected orders for about 233 billion Euros.
2) Do you think that Italian regulations in the field of sustainability are exhaustive? What could be improved?
With the Budget Law 2020, the Italian government, in order to achieve, by 2030, the 17 Sustainable Development Goals indicated in the 2030 Agenda, has – in accordance with European policies – dictated a series of regulations aimed at sustainable development and has done so with greater incisiveness than in previous years. However, the measures adopted in some areas of primary importance (such as education or protection of biodiversity) are still totally insufficient in terms of content and resources allocated. It is necessary, however, to carefully examine the Budget Law 2021 (published in the Official Gazette a few hours ago) in order to give an updated opinion on the state of the art of Italian legislation on sustainability.
3) Do you think there are measures to be taken to improve the green bond market?
As you know, ICMA, the international association of capital markets, was the first to identify the so-called “Green Bond Principles”, i.e. the characteristics that a bond must have in order to be defined as green. I believe, however, that in order to improve the green bond market, it might be useful to introduce a legal or regulatory provision that would list the environmental projects that can be financed by means of such debt securities. Similarly, the introduction of more effective sanctions against companies in case of violation of the Green Bond Principles in the years following the issue could be useful.
4) Will there ever be a global standard for certifying a particular green bond investment as “green” (apart from the ICMA guidelines)?
I absolutely hope that this will happen as soon as possible. At the very least, I hope and believe that the European Commission will not stop at the issue of the “EU Green Bond Standard”, but will continue to deal with these very important debt securities, also because, as is well known, the first green bond in the world was issued on the market by the EIB, the European Investment Bank, on July 4, 2007.
5) In addition to green bonds, there is a lot of talk about social bonds and sustainable bonds: how does the process of identifying social and sustainable initiatives alongside equity securities take place? Social Bonds are bonds whose proceeds must finance or refinance social projects or activities that achieve positive social results (even if only for certain segments of the population) and/or address a specific social problem (think of the bonds issued following the Covid-19 pandemic). Social Bonds, which are regulated by the Social Bond Principles (SBP) dictated by ICMA, can be issued to address issues such as food security and sustainable food systems, socio-economic progress, social housing, access to essential services and basic infrastructure, but also, under certain conditions, research and development. Similarly, proceeds from Sustainability Bonds should be used to finance or refinance ecological and social projects or activities, preferably in accordance with the UN Sustainable Development Goals (SDGs) or the Paris Agreement.
6) What do you see as the risks of a financialization of real sustainability?
I believe that the main, but absolutely avoidable, risk of a financialization of real sustainability is to lose sight of the very purpose of ESG performance and aim exclusively at profit.
7) Is the yield of green/social/sustainable bonds comparable/better or worse than standard bonds?
To answer this question, I will quote a figure: in 2019, green bonds generated yields of 7.4% compared to 6% for standard bonds. This figure should, however, be better explained. Generally speaking, with regard to banks specifically, where they have a sustainability-focused portfolio, on the one hand, they have to bear higher costs but, on the other hand, they can get higher returns for their assets, as well as have higher customer retention and clearly, a better ESG rating.
….see you next month!